A collection of observations, news and resources on the changing nature of innovation, technology, leadership, and other subjects.

April 16, 2018

Customer Experience - the Key Competitive Differentiator in the Digital Age

About five years ago, McKinsey conducted an online survey of over 850 CEOs and other senior executives to find out how their companies were faring in their implementation of digital technologies and strategies. The data showed that executives were generally optimistic, but they still had much to do to achieve their digital business objectives.Organizational alignment and leadership were the critical factors in the success or failure of their digital strategies.

More specifically, the survey asked them about their progress in embracing five major digital trends: big data and advanced analytics, digital engagement of customers, digital engagement of employees and external partners, automation, and digital innovation.While all five trends were important, executives said that digital customer engagements was their most important competitive differentiator and where they were expecting the largest financial returns.

This is not surprising, even more now than at the time of the survey.A company can differentiate itself from competitors in one of two key ways: by providing a superior customers experience or by offering the lowest prices. For companies that prefer the former, digital channels are, far and away, the most cost-effective way of reaching out to their clients. The explosive growth of mobile devices means that you can be engaged with your customers whether they are at home, at work, in your store or anywhere else.

But, digital customers can be fickle and hard to satisfy.It’s quite difficult to keep up with their fast changing behaviors and expectations.New products and services are hitting the market faster than ever, brand loyalty keeps decreasing, and the increased competition continues to shift power from institutions to individuals.

Consumers want a positive experience, not just a transactional relationship, with the brands and companies they engage with.The customer experience, - that is, making each of its clients feel special, - is increasingly the key factor for a business to stand our from its competitors.

The rise of the user experience as a key competitive differentiator has led to the growing importance of design thinking in the last few years. Design thinking aims to make our interactions with complex products and services, as well as with complex institutions, as appealing and intuitive as possible. A design-centric organization should be adamantly focused on its customers needs, rather than just on its internal operational efficiencies.

A number of firms have introduced tools, platforms and services to help their business customers deliver such a superior experience to their clients. One such company is Adobe, which has long been associated with helping launch the desktop publishing revolution a few decades ago with technologies like the widely used Portable Document Format (PDF), Acrobat, and Photoshop. Over the past few years, Adobe has embraced the Experience Business as one of its key strategies. Last year, for example, the company introduced the Adobe Experience Cloud, a cloud-based platform that integrates a variety of technologies to help companies deliver positive customer experiences.

A few weeks ago, Adobe released the Experience Index, a benchmark that companies can leverage to help them understand the experiences that matter most to their customers based on a consumer expectations survey.I was quite intrigued when I first heard about the Index, because it’s the first attempt I’ve come across that tries to actually quantify what’s meant by customer experience, a concept that’s been primarily explained through qualitative anecdotes and case studies.

To create the Experience Index, Adobe commissioned an online survey of over 1,500 adults to ascertain their digital experience preferences in four industries: retail, travel and hospitality, media and entertainment, and financial services. Survey participants were asked to assign a numerical score to different statements, - some positive, some negative, - organized around four main tenets of customer experience.The tenets are listed below, along with examples of the kinds of statements survey participants were asked to score.

Know Me and Respect Me: I receive an email at the end of the year with links to all the documents I need to complete my taxes; I get faster access to a hotel line because I’m a frequent hotel guest; I open the mobile applications of my favorite car rental company, but to log in I have to remember my frequent traveler number.

Delight Me at Every Turn: I’m able to order food at a stadium from my mobile phone and it’s delivered directly to my seat; I’m able to take a picture of a check and instantly deposit it using my mobile banking application; I pre-order my coffee using a mobile app, but when I arrive the order isn’t ready, and I end up waiting.

Make Technology Transparent: I’m able to purchase tickets and select seats for a movie theater from my mobile phone; Using an app in my smartphone, I’m able to request a car to take me anywhere, which automatically bills my credit card and sends me an email receipt; I’m unable to transfer money between accounts on my mobile application so I have to call or visit the bank.

Speak in One Voice: When I contact customer service about a problem, an AI chatbot anticipates my questions and quickly resolves the problem; A flight was delayed, and before I even land I’m rebooked and receive an email apology; I need to return an item I bought from an online merchant with a liberal return policy, but then I find out that the return policy is different and rather costly because the item was actually bought from a marketplace seller.

Overall, the digital experience satisfaction score was 55%, indicating that companies have a long way to go to meet their customers’ expectations.Know Me and Respect Me received the highest score amongst the four tenets at 61%, showing that the efforts to improve personalization are beginning to pay off.Speak in One Voice was lowest at 49%, showing customer frustrations with experiences that are not consistent across their various interaction points with a company.

Over 70% of consumers agreed with the statement that “technology innovations will improve their lives,” but a similar percentage felt that “technology today puts my private information at risk.”64% agreed that “if done well, a completely automated interaction can still delight me,” but only 47% of those aged 65 and above agreed with the statement.

While 78% of survey respondents agreed with the statement “whether in store or online, businesses should provide personal service,” there was a wide variation by age group.Over 85% of respondents aged 50 and above agreed with the statement, but only 64% aged 18-24, and 72% aged 25-34 agreed.

Consumers were particularly positive about experiences that were personalized for them, such as loyalty programs that provide good recommendations and free and easy returns, and being able to check into a hotel via a mobile app and get an electronic room key without waiting at the front desk.On the other hand, they were particularly negative about hidden costs, such as undisclosed cancellation policies on travel packages and unclear return policies from online vendors that result in unexpected costs.

Experiences that once delighted customers are soon routinely expected.For example, around 65% of those aged 18-24 are impressed with the ability to get their flight boarding pass though a mobile app or to have the airline proactively rebook them after a flight delay.But the percentages drop to around 45% for those 25-34, who’ve been traveling for a longer number of years and thus take such benefits for granted.

Finally, the survey revealed that innovations are more impactful when they improve an everyday experiences, such as pre-ordering coffee through an app, compared to a more occasional interaction like filing taxes.

“As consumers, we’ve become quite demanding,” said Adobe executive Brad Rencher in a recent keynote.“And the theme that ties this all together isn’t the things we want, it’s the experiences we demand - the sum total of all of a customer’s interactions with a brand, from awareness to purchase to consumption, are now critical… so at each touch point, consumers feel uniquely understood and important.To do this right, brands need a holistic understanding of their customers, so they can wow them at every single interaction.This is where we’re all competing for the foreseeable future.”